The President isn't the Prime Minister, so Italy still lacks a
proper government, after its split election in February, but the
President does stuff like calls elections, and helps attempt to
organize a government, so his agreement to stay in helps
stability.

And beyond that, the thinking remains in Europe that the big
countries will not be allowed to go bust. Even Italy.

They have horrendous growth problems that seem to be getting
worse (and
they lack a plan) but the actual sovereign debt problem just
isn't the big worry.